Why do startups fail in the first year? 3 foolproof tips to avoid losing

20% of startups close in the first year of their establishment, and half within the first five years, according to the US Bureau of Labor Statistics, as reported by CBInsights, a US firm that specializes in analyzing markets, companies and businesses. According to the same study, 35% of startups fail due to a lack of market demand, in addition to several other reasons including cash flow problems, overcompeting competition, a flawed business model and legal challenges.

In a report published by the American Entrepreneur magazine, author Alexander Zeltov says that before launching his own business, he committed to doing a great analytical job with his team. Here are the 3 most important tips that he extracted from his experience, which you can follow to start your business and achieve success in the short and long term.

1. Stop romanticizing the idea of ​​business

The writer says that the principle of “love what you do and do what you love” sounds romantic and inspiring, but this does not apply to the reality of work, explaining that you should first assess if there is enough demand in the market to make your passion profitable, and it is better to ask yourself a few questions Before starting a business, such as:

What is the real reason why you want to start a business?

What are your personal and business goals?

Who is your customer?

What problems does your customer have, and how can your company solve them?

What are your competitors suggesting, and how will you differ from them?

What resources do you need to start a business?

Not worrying about your competition?

The writer stresses the need to look at the market consciously and analyze the capabilities of your competitors, as this is especially important if you intend to attract investors, and one of the important questions that the investor will ask you is your competitive advantage, and in this context, there is a 3-step system that you can Use it to analyze the market.

Basic research: Instead of imagining what a consumer wants, you can ask them directly by using surveys, research, and interviews for this purpose, and if you already have customers, you can use insights from Google Analytics, YouTube, social media, email reports and other platforms to understand Customer preferences and behaviour.

Secondary research: organizing the information received and studying it in detail; This is done by asking: Is this consistent with your understanding of the market? And how can your product solve customers' requests?

SWOT analysis: This type of analysis is a reliable way to study the strengths, weaknesses, opportunities and threats of a project idea. Through this analysis, you can determine if the market needs a product, and if it will achieve the success you expect.

The author shows that as a result of this research, you will find answers to these questions:

Who are your customers? What are their sales, ratings, and limits?

Who are your competitors? And what do your potential customers like or hate about their products?

What should you suggest to the market to be more successful?

What kind of unique offer can you make?

Test your hypothesis

The writer points out that once you do the market research and know what the consumer wants, you need to make sure that your product meets their demand, and it must be done at the lowest possible cost, in the form of a minimal product, which provides an opportunity to develop a new product for a minimal cost and collect feedback from potential clients.

Additionally, you can use A/B Testing to validate your assumptions about future business; You can use this method to check the type of website version or design that customers like best.

For example, you can create two versions of a landing page for the same purpose, with the same price and text, but with different designs or layouts, and then analyze which version your consumers viewed the most and which gave you more quality.

In the end, the writer says that after following these three steps, you can start looking for investments, noting that in this way, you can make sure that money and effort are not wasted, and your startup will not fail.